From 1 July 2026, employers will be required to pay superannuation guarantee (SG) contributions at the same time as salary and wages are paid (Payday super). As employers transition to this system, some employees may temporarily exceed their concessional contribution cap, particularly in the 2026 or 2027 financial year.
Although the government has indicated that they will introduce amendments to ensure individuals do not exceed their concessional caps in 2026/2027 as a result of the transition to Payday super, these details are yet to be finalised.
Why could this happen?
Concessional contributions are counted when they are paid into your super fund, not when your salary is earned.
During the transition to Payday Super, some employees may receive more than 12 months of employer contributions in one financial year (for example, where contributions relating to the quarter ended June, are paid in July, and regular payments continue during the year).
This may affect:
- High income earners, and
- employees with salary sacrifice arrangements.
Will this result in extra tax?
In most cases, there is no negative tax outcome.
If employees exceed their concessional contribution cap:
- the excess is added to their assessable income, and
- taxed at your marginal tax rate, with a 15% tax offset to reflect the tax already paid by your super fund.
Overall, the excess is effectively taxed in the same way as salary or wages.
What happens if contribution exceed the cap?
- Employee’s super fund reports contributions to the ATO.
- If the employee’s total super fund has a balance below $500,000, they could access the excess unused carry forward concessional cap which may help. This allows employees to access their unused cap from the prior 5 years. The ATO will automatically apply this to employees who are eligible to access it.
- Otherwise, the ATO issues:
- an Excess Concessional Contributions Determination, and
- a Notice of Assessment or Amended Assessment.
- Employees then choose how to manage the excess.
Employees options
- Release the excess from super: Employees can request to release up to 85% of the excess via myGov. The ATO applies the amount against your tax payable and any other tax debts.
- Leave the excess in super: Employees pay the additional tax personally. The excess then counts towards their non concessional contribution cap.
If an employee’s total super balances was above $2 million at 30 June 2025, the non concessional contribution cap for 2026–27 is nil, so releasing the excess is generally recommended.
Worked examples
Example 1 – High income employee
John earns $250,000 and receives $30,000 in SG. His employer previously paid SG monthly in arrears, but moves to Payday Super during the year.
As a result, John receives 13 monthly SG payments in the 2025–26 year:
- Total concessional contributions: $32,500
- Excess concessional contribution: $2,500
The ATO includes the $2,500 in John’s assessable income and applies the 15% offset.
John can release up to $2,125 (85%) from super to help pay the tax. As his total super balance exceeds $2 million, releasing the excess is the preferred option.
Example 2 – Employee with salary sacrifice
Sarah earns $100,000 and salary sacrifices to reach the concessional cap. Her employer currently pays super quarterly but moves to Payday Super part way through the year.
Without changes, Sarah’s total concessional contributions for the year would be $37,500, exceeding the cap.
To avoid an excess, Sarah will need to reduce her salary sacrifice arrangement as her employer transitions to Payday Super.
Key takeaways for employees
- Temporary excess concessional contributions may occur during the transition to Payday Super.
- In most cases, there is no adverse tax outcome.
- Employees with salary sacrifice arrangements should review their contributions early.
- Seek advice if you are close to contribution caps or balance thresholds.
If you’ve got questions or want to talk through how these changes might affect you, just reach out, we’re here to help you get it right.